Has the US stock market made a top? While this is too early to say for now consolidation is very likely at these record-high levels. Bond yields continued to rise this week and all major news such as the fiscal stimulus and latest earnings reports are now priced in.

Last week I wrote, “Now that the expectation about a fiscal stimulus has turned into a reality the chances of a stock market pullback are high. Both from a valuation perspective and profit-taking”. During the previous week, all major US stock indices made a small correction. And small-cap stocks underperformed. But this is not unusual as the Russell 2000 (IWM) has outperformed year to date in 2021.

After one year from the historic crash of March 23, 2020 due to COVID-19 and the subsequent comeback of the US stock, what is next for the stock market? Hard to predict, I expect however a consolidation and even a correction.

Economic News

Retail Sales were a big miss. The figure of -3% was much worse than the consensus of -0.5%. Also, the figure for the Retail Sales Control Group for total industry sales was a big miss coming in at -3.5%, compared to the consensus of -0.9%. In the coming weeks, the progress of the retail sales should be better due to the fiscal stimulus.

The Fed has raised its economic outlook and said that near-zero rates will remain until 2023. As expected key interest rates remained unchanged.

According to Yahoo! Finance “The Fed also upgraded its outlook for unemployment and inflation in the U.S. over the next several years. FOMC members now expect the unemployment rate to dip to 4.5% by the end of this year with inflation of 2.4%. Three months earlier, the Fed expected an unemployment rate to improve to only 5.0% with core personal consumption expenditures rising by just 1.8% by year-end. Real GDP growth will likely come in at 6.5% this year, the Fed projected, up sharply from its previous 4.2% growth forecast.”

Both Building Permits and Housing Starts data were weaker than expected. And weekly Jobless Claims were worse than expected. Continuing Jobless Claims came in at 4.124 M compared to the consensus of 4.142 M, and the Initial Jobless Claims came in at 770K, 70K worse than the consensus of 700K.

U.S. Stock Market Weekly Performance

The major US stock market indexes closed as follows on March 19, 2021:

• Dow Jones Industrial Average: Close 32627.97 , -0.46% for the week, +6.60% Year-to-date (DIA)

• S&P 500 Index: Close 3913.10, -0.77% for the week, +4.18% Year-to-date (SPX)

•  Nasdaq Composite Close 13215.24, -0.79% for the week, +2.54%, Year-to-date (COMP)

• Russell 2000: Close 2287.55 , -2.77% for the week, +15.83% Year-to-date

Economic events for the week March 22- March 26, 2021:

Important economic data for the next week will be the weekly Initial and Continuing Jobless Claims, the Durable Goods Orders, the Markit Manufacturing PMI, the Markit Services PMI, the Gross Domestic Product Annualized(Q4), the Personal Income and Personal Spending.

Sources:

https://www.wsj.com/market-data/stocks/us/indexes

https://www.fxstreet.com/economic-calendar